The removal of Additional Customs Duties on wines last month might have brought the prices of low end wines by up to 30%, but the consequent hike of state excise duties has made the premium wines a lot more expensive. The Central Government is unable to do anything to ease the situation.

In an interview , Mr. Ajay Dua, Secretary to the Government of India, Department of Industrial Policy and Promotion, Ministry of Commerce & Industry admitted to me , 'the states are beyond redemption. Liquor laws are within their preview. Much as we may not like what they do, we are helpless. We have reduced the duties but there is no certainty that they will not impose higher duties.'

'But the 'decrease in duties' had made the fine wines even more expensive than before'. I asked. The Secretary's reply was not very convincing, 'We also have to keep in mind issues like revenues through taxation.' Perhaps, the governmental logic is that the premium wines are for the upper or richer class who are not price sensitive.

'The Financial Commission has also been recommending more and more revenues to the states, and the government has so far been increasing its recommendations in toto', added Mr. Dua.

But why was the customs duty increased to 150% when beer war rightly left untouched at 100%? was my question. 'The government thinking has been to keep the alcohol consumption low and beer being a low alcohol product was spared the increase.' Mr. Dua did not elaborate why wine which is also a low alcohol (not as much as beer though) , but also a healthier lifestyle drink was not treated at par with beer.

'We are at least moving towards accepting beer and wine as lower alcohol and thus desirable among alcoholic beverages,' said Mr. Dua adding that though the constitution had given the mandate to the states to check alcohol drinking, the central government had in fact increased the beer and wine producing capacity in a big way.'

Aren't EU and USA upset with what is going on? 'They realise that at least we are on board. They understand the complexities of Center-State relationships. Look at the USA. Their own state laws are so complex. So they appreciate our stand that we did the best we could.'

What about the legislation that was supposed to be enacted that would limit the powers of the state to charging excise duties, no more than the imported wines. Again, Mr. Dua was very diplomatic in fending off my query. 'States are free to charge as much as they want. The legislation was to be only for the potable alcohol.'

Delhi did not release any Transport Permits (TP) which allow the delivery of alcoholic beverages to the customers, till last week. Since Monday, the permits have been allowed at the old rates, except the label registration charges of Rs. 5000 each have been validated till March 2008 only, thus reducing the period of validity.

In Mumbai, the addition of 150% excise duty has been made effective but no one has got the material transported to the customer, hoping to reason out with the government officials. It has been reported but (not verified) that Moet Hennessy and Sula are to represent the case to the Maharashtra Excise Commissioner on behalf of the importers and local producers. One can only hope that the government keeps the interest of the hapless consumer at heart too.

In Bangalore, the status quo has already been maintained-for now. Perhaps, next year may be another story. For the time being the Bangalore and Delhi consumers can afford to enjoy their glass or two of wine. One hopes Chandigarh remains pro-active.

Government may be powerless in reigning in the States. But the increase of customs duty, especially on fine wines was unjust and uncalled for and one hope the common sense prevails on the ministries involved and the duty is rolled back to 100%, at least on the fine and premium wines. The government will only be sending the right signals and the duty collection will be manifold. Otherwise, the bootleggers will have a field day, but the customer will be dumped with badly stored wine at still exorbitant prices, while the exchequer misses out its due share of the import duty.

Subhash Arora